Chairman Roth, and Members of the Senate Finance
Committee, thank you for allowing me this opportunity to appear here this morning
to relate to you my experience with the Internal Revenue Service.

Like many women who have gone through a divorce,
I was the one stuck with the tax bill for our last joint return for tax year 1983.
The IRS assessed that return for additional taxes of $7,000, but sent all the
notices to my former spouse. Unfortunately, it took him over a year to notify
me of the assessment. I immediately contacted the IRS. The IRS had ceased to be
willing to examine my records and was demanding that I pay them $16,000 instantly.
At the time, my former spouse was earning in excess of $40,000 a year as a glazier
and had no dependents. My income was approximately $15,000 a year as a newly hired
bank employee with a dependent 14 year old daughter. For the two years following
my divorce, I was financially destitute. I had just managed to get an apartment
-- a real home for the two of us.

I mention this to remind you good people that
when an IRS collection procedure gets out of control, the victim of that collection
still has to deal with all the other traumas of their life. An honest collection
by the IRS, with no snafus, of an amount actually owed is incredibly stressful
in itself. Therefore, it is critical that the IRS not be allowed, whether by design
or accident, to pursue taxpayers for erroneous debts. At present, there are no
effective protections against this.

In my case, I had to file a Tax Court Petition
to force the IRS to examine my records, which I did in 1988. This is not unusual
if the IRS does not get a response to early requests for records, and I did not
feel resentful or persecuted. However, it did cause problems and added to my stress.
I had to use my rent money to pay the accountant and lawyer, and so I lost my
apartment. My daughter and I were reduced to sharing a rented room. I consoled
myself with the thought that we had survived worse and we would get another apartment
later.

It is important to note here that my ex-husband
was not a party to this petition in tax court. We settled out of court and the
IRS agreed to a reduced tax from $7,000 to $2,709, a reduced total demand from
about $16,000 to approximately $3,500. I went to the meeting in July 1988 to sign
the agreement and, check book in hand, prepared to pay the amount in full at that
time.

The IRS refused my payment until they had sent
me a bill because they would not have anywhere to credit the money without the
bill and they claimed they needed time to calculate the exact interest due. I
wanted the payment properly credited. I wanted this to go well and to be permanently
resolved. I thought, in a few weeks, I'll have a bill. But, the IRS said that
the bill would take six months to prepare and arrive no later than January 1989.
Six months! I recall asking if I was going to be charged interest for the six
month waiting period and the IRS attorney, through my accountant, said no. The
interest would be calculated through the date of the agreement and as long as
I paid it right away in January, there would be no additional interest. He said
it would be about $3,500 total. I never understood why they could not just whip
out their calculator and tell me what I owed right then and get this whole thing
over with.

The bill never came and in February 1989, I
started calling the IRS asking where it was. I called the Fresno office and they
suggested I also call Laguna Niguel. Both offices had no record of any taxes owed
by me. I found this hard to believe. I wanted to be absolutely certain they were
correct. I wanted to remarry and I did not want to bring this tax bill into the
marriage. I called both offices again in March and again before July. I was told
the same thing, that I owed nothing for 1983. I asked for a receipt or something
to show this was paid because I was simple minded enough to believe this was as
a reasonable request. The IRS employees all said that they "don't do that." I
had to take the word of the IRS that I owed nothing. In this, I had no choice.
At the time, I was not aware that my account had been set up on a separate bookkeeping
system to which the IRS employees with whom I spoke did not have ready access.

It works like this: when you file a tax return,
it is recorded in a Master-File. This is what the IRS clerks pull up on their
computer when you call and ask if you owe money. However, at some point in 1989,
the IRS "split" the Master-File of our joint 1983 return and transferred separate
assessments into two Non-Master Files, in each of our individual names and respective
social security numbers. This was due to the fact that I had gone to tax court
and my ex-husband had not. Therefore, the IRS set up separate files.

These Non-Master Files do not show up on the
computer when the IRS clerks check a taxpayer's social security number for a balance
owed. According to the attorney who explained this to me in 1997, the Master-File
continues to exist, but may show as a zero balance, until the IRS recombines those
accounts. It will then reflect the correct amount owed according to the agreement.
Until that happens, every time the IRS clerk pulled up my or my joint signer's
social security number, they will see a zero balance and conclude that no taxes
are owed. To add to the confusion, there is no notation in the Master-File that
it has been "split." Therefore, there is no way for the IRS clerk to know that
you might have an outstanding collection in a Non-Master File. As a result, I
was repeatedly told by IRS clerks that I owed nothing. So far as I know, to this
very day, these accounts have not been recombined and the Master File continues
to exist with a zero balance while the Non-Master Files shows a balance owed.
Yet, the IRS has been aware of this error at least since I notified them of it
earlier this year -- if not even earlier. I have made repeated requests of the
IRS to recombine these accounts ever since I learned of the problem. As far as
I know, it has not been done.

It is incredible to me that Non-Master Files
are allowed to co-exist with Master-Files at all! It creates two accounts under
the same name with the same social security number, that can reflect conflicting
balances due for the same tax year for the same person. Such a practice substantially
increases the potential for error and confusion inside the IRS while simultaneously
making it impossible for a taxpayer to get reliable information from the IRS.
The taxpayer either gets conflicting information, or in my case, consistent but
incorrect information. Every day the taxpayer is unable to get accurate information
from the IRS about a balance owed, is another day's interest added to the debt.
Even while the taxpayer is wandering around in this IRS maze of multiple accounts
the clock never stops running. This is incredibly frustrating and unfair to any
taxpayer. Unable to overcome this obstacle to compliance through no fault of the
taxpayer, he or she is charged penalties as well for that failure! Much of my
misery was caused because the IRS could not answer accurately the simple question,
"How much money do I owe?" As far as I know, that condition has not changed.

To add to the confusion, my former spouse telephoned
my fiance to complain that he had paid the tax and now the IRS was after him for
it again. He refused to share his records with me, but, his story and the IRS
story both matched. Still, I had no independent records to prove either one. I
requested his payment records from the IRS in 1988, records to which I believed
I was entitled. I made a second request for those records in 1997. The IRS has
refused me these records or even a statement as to their content. Why, if my joint
signer has never paid anything on this tax, is the IRS hiding that information
from me? How can I know, for certain, what my liability is without the records
of my joint signer? Perhaps he has paid nothing, but if that is so, then their
refusal to share that information with me makes no sense.

Mr. Chairman, I did everything humanly possible
to obtain correct information. I made every attempt to get this tax paid and every
conceivable request for some kind of record to evidence what the IRS was telling
me. I know of nothing else I could have done.

So, after being wrongfully informed that there
was nothing owed, I remarried in July 1989. I carried on business with the IRS
without incident and my new husband and I filed a joint return in 1990 and received
a refund. We were now convinced, of course, that if I owed any money to the IRS,
the IRS would never have issued a refund, so now we were confident that the IRS
information was correct. It was not.

In September 1990, without any notice and without
our knowledge, the IRS filed a tax lien against me.

On December 19, 1990, the first lien holder
on our home sued us as a result of that Federal Tax Lien in the sum of $6,161.41.
The lender threatened to call our loan if we did not immediately get the IRS lien
released. We would have lost our home. A home, by the way, that my new husband
bought for himself 6 years before he met me. So, the real damage was being done
to him, an entirely innocent spouse.

All of this, after I had been so careful to
pester the IRS repeatedly for as a bill and been repeatedly told that no money
was owed!

Worse than that, the lien did not reflect the
terms of our earlier settlement agreement! The tax lien reflected an assessment
nearly twice that of the IRS agreement and the IRS refused to discuss that fact
with me. Meanwhile, while the assessment was 'ripening' it had gone up to over
$8,000!

I tried to reopen my tax case and was told
that the Federal Tax Court did not enforce out of court settlements made with
the IRS! How convenient this is! Only the taxpayer is held to the agreement, not
the IRS! I was adamant that this was just morally wrong! I was very upset!

I fought this collection for two reasons: (1)
because, based on information provided by the IRS itself, I sincerely believed
I owed nothing and (2) because I believed the IRS, even if they intended to collect
twice, was obligated to calculate my collection in accordance with our agreement.

My new husband contacted the Revenue Officer
who had filed the lien. The Revenue Officer informed my husband, and later me,
that he had my former spouse's file "..right here on my desk..." and he knew that
my former spouse "..had paid the taxes..." but that it was not "..relevant..."
because these were separate collections. He insisted that if we wanted my former
husband's payments to offset my liability, we would have to produce those records,
otherwise we would have to pay it again. The duplicate payment would balance the
IRS books and he would help us file for a refund of the overage.

Imagine my new husband's frustration at the
prospect of effectively paying $8,000 dollars that we believed had already been
paid.

At this point, which was early 1991, I requested
a Problems Resolution Officer who, after some inquiry into my account, came to
the conclusion that I, indeed, did not owe anything for the 1983 taxes and that,
once she got a written confirmation of this from the Fresno office she could get
everything "abated to zero." Meanwhile, she said, the IRS agent should stop collection
activity -- which he did not. However, I thought, "Great! This is all going to
get straightened out soon!" I was wrong. A few days later she called me and informed
me that the IRS Fresno Office had changed its mind about providing her with the
necessary documents and, without those, there was nothing she could do.

I made one final attempt at reasoning with
the collection agent. He merely repeated that he knew the tax had been paid, and
he knew I didn't owe the money, but it didn't matter. The only way to get rid
of the tax lien was to pay the $8,000 whether we owed it or not.

The collection agent then offered to assist
us with regard to the refund application. He knew we were being sued by the bank
because the IRS was a co-defendant. So, he just refused to do anything and let
the bank force us to pay what we did not owe. With the bank about to call the
loan, we had no choice but to pay the IRS demand in full.

Mr. Chairman, although I am giving you a rather
general description of these events for the sake of overall continuity, it is
important for me to tell you that both my husband's and my own physical and emotional
well being suffered tremendously under the constant strain of these repeated attempts
to get the IRS to honor their agreement and collect only what I owed. It was physically
exhausting. We almost never slept. Every conversation had to be memorialized in
a letter. There were the visits to the attorneys and the accountants, their bills
and their depressing advice, "pay it, it's cheaper than fighting" and the very
real prospect of loosing our home to the bank if they called the loan. You don't
eat, you don't sleep, you're afraid to talk too much to each other for fear you'll
take it out on your spouse. If you do talk, it's about the IRS. We were newlyweds!
I cannot describe the guilt, knowing that I had brought my new husband into this.

My parents became so concerned for my health
that they cashed in a retirement CD and loaned us the money to pay the IRS. Since
they were living on a fixed income, this was a big deal for them to do. I know
they made sacrifices to do this. It was as a selfless act of love.

On February 21, 1991, we handed a cashier's
check for the entire amount they demanded, $8,194.73. Please keep in mind the
original underlying tax was $2,709 and that the original amount due was supposed
to be no greater than $3,500. The balance was interest that accrued from July
1988 to February 1991, a period of 18 months. In that time frame, the "bill" that
I could not get anyone to give me to pay nearly tripled from the original amount!
I was forced to pay $4,500 for their mistakes!

In exchange for this payment, we were given
a Certificate of Release of Federal Tax Lien. My cashier's check reflected my
name, my social security number, the tax year to which it was being applied --
1983, as well as my tax court docket number. In other words, the IRS had everything
it needed to properly credit the payment. I could not have made it any clearer
where to apply the proceeds of the check.

In February, 1992, a letter arrived from the
IRS office in Maryland signed by a woman with the authoritative title of "Chief,
Accounting Branch." The letter said the IRS had received a payment and, if we
had made this payment, please send the IRS a copy of the check with an explanation,
which we did. We also asked her in that letter not to refund the money or any
portion of it unless she first made sure neither of us owed any money anywhere
for any year.

In March 1992, we received an unsigned IRS
form letter indicating that the payment had been applied to our 1990 joint return.
I actually telephoned the IRS and asked about this and was told simply that, if
the Accounting Branch determined that there were no taxes owed for any year, the
only way to refund the money was to credit it to the most recent tax year.

In other words, they could not credit the payment
to my 1983 tax year unless there was a balance due. Therefore, we logically concluded
that the Accounting Branch did what we asked, checked out our taxes, found nothing
owed and was merely refunding us the overpayment in accordance with their own
bookkeeping system. We had absolutely no reason to think that the refund was in
any way erroneous.

In November of 1996, nearly 5 years later,
out of the blue without so much as one prior notice, we received a certified letter
from the IRS containing a Notice of Intent to Levy. The particulars of the tax
being levied were identical to the particulars of the tax lien that had been released
in 1992. For reasons unknown to us, they changed their mind and wanted more money
again. Why? I telephoned the agent who sent the letter and was told it was a different
assessment because, even though everything else was identical -- the tax year,
the amount, the assessment date -- there was an "N" after my social security number
on this assessment and therefore, I had to pay it again. The "N", I later learned,
is a tag for "Non-Master" File. Remember those? The separate collections that
nobody seems to know about? Well, this was one of them. Whether the IRS failed
to close it at the time we paid it in 1991, or whether they reopened it because
they wanted to get the refund back they gave us in 1992 doesn't really matter
much to me. Whichever one occurred, the fact remains, the IRS had made yet another
error. Once again, they demanded that I balance their books and pay for their
mistakes. How many times was this going to happen, I wondered?

A tax attorney informed me that my release
of lien was meaningless adding, "..the IRS refiles these all the time. I cannot
tell you how many people come in here clutching these things (release of lien)
for dear life thinking that they offer some kind of protection...." He stated
the Taxpayers Bill of Rights did not allow the IRS to collect interest from the
taxpayers based on its own errors, and even suggested that I write to my Congressman
but cautioned me not to expect a significant outcome because, "..they (Congress)
can't really do anything...", Congress is less than effective when dealing with
the IRS on behalf of taxpayers.

I gave Problems Resolution another try. This
time, they were less an advocate for me than an arm of the IRS collection office.
It was, in fact, the Problems Resolution Officer who told me "..you know, you
kept a refund to which you knew you were not entitled...". Her tone of voice was
not friendly. Keeping a refund that you know you are not entitled to is a crime.
She demanded I pay back the refund. So much for the Problems Resolution Office.

After a brief hospitalization for surgery resulting
from a freeway pile up that totaled our car, my husband resumed work in January
1997, only to discover that while he was recovering from surgery the IRS had levied
against his salary. My husband would be allowed to keep $18 a week to support
me and the children for approximately two months. Anyone entering a grocery store
today knows that is tantamount to condemning us to a soup kitchen for our meals.
Two months of being unable to meet our financial obligations would have sent us
into bankruptcy and foreclosure. Again, the innocent spouse was going to be punished
for my old tax problem.

To protect his ability to provide for his children
and myself, my husband set up a separate residence in San Clemente and filed for
divorce on February 3, 1997. In California, the day you file for divorce your
salary is your sole and separate property. The IRS ignored that fact and left
the levy in place. In an unusual determination, the county refused to comply with
the second levy and my husband's income was safe. However, his retirement fund
was not. That was community property and we fully expected the IRS to swoop in
the next day and take the whole thing. So, on the 5th of February 1997, I filed
bankruptcy to stop the IRS long enough for us to figure out what to do about this.

My bankruptcy notice was hand delivered the
same day. The following day the IRS notified me that my schedule C's for 1993,
1994 and 1995 were "questionable," and asked me to reconsider them. We took this
as a thinly veiled threat to punitively audit our returns.

The IRS refiled the lien for which I had a
release. We discovered this in March of 1997. I am informed that this is common
practice. The liens threatened my husband's residence which was his separate property
but the IRS ignores this in community property states. I have been informed that
the liens would survive the bankruptcy, as all liens do. So even though this was
his sole and separate property, it was possible.

My now widowed mother could not bear watching
us go through this and took out a loan against her retirement so we could pay
the IRS and get this over with. However, my husband and I knew that paying the
demand would never resolve this. We tried that in 1991. They would screw this
payment up too and in a few years be back for more "with interest." We needed
closure, some way to end this forever.

Since the real problem occurred back in 1989,
and the IRS never correctly set up my account for $3,500, and because every penny
over that amount was a result of that error, we determined that under the Taxpayer's
Bill of Rights provision that the IRS could not make us pay interest for their
mistakes. We should not owe more than $3,500. If we could get the IRS to correct
their errors we should be able to pay $3,500 and be done with it. So, that's what
we did. We made a directed voluntary payment of $3,500. We put the rest of the
money in a CD in case the IRS swooped in to destroy us unannounced. We waited.

Our lives are now forever altered. Joint tenancy,
joint bank accounts, joint tax returns are no longer a part of our life. We will
pay additional taxes every year as a result. Our confidence in the integrity of
the IRS has been completely shattered. This year we got a refund on our 1996 taxes
and sits in a CD as does the $3,500 that the IRS recently returned to us without
any explanation. We don't dare cash refund checks anymore. My credit is completely
destroyed, and my husband's credit is seriously damaged. We will suffer the effects
of this IRS collection for the rest of our lives.

I originally wrote to you, Mr. Chairman, because
the IRS should not be above the law. Couples should not have to divorce because
of the IRS. Once you became involved, the IRS released all the liens and sent
us back the $3,500. Senator Roth, your effort saved us from being forced to live
apart, and preserved our ability to provide for our children. For this, we will
be forever grateful. However, the conduct of the IRS remains the same, and for
thousands of other taxpayers, there is no help. Ours is a hollow victory if the
IRS is allowed to continue this type of conduct.

People tell us how terrified they would be
to do what we have done. They are convinced that the IRS will target us for punitive
audits. One person put it this way, when she learned we had written to Congress,
"..that's like painting a bull's eye on your chest and giving the IRS a loaded
gun...." She believes the IRS will never forget this and someday get back at us
in retaliation. Mr. Chairman, she could very well be right. The IRS is judge,
jury and executioner -- answerable to none. We do not believe that our experience
is isolated. For over 10 years the IRS has conducted itself as a legalized extortion
operation willing to commit abusive acts to collect money, even that which they
know is not owed.

An agency of the United States Government,
allowed such sweeping authority as that granted to the IRS, should be held to
the highest standards of honesty and integrity. The IRS is not. Those of us subject
to that authority should be guaranteed an accessible and effective remedy for
its abuse. We are not.

It is a disgrace to our nation that an arm
of our democratic government is allowed to behave as if it were an extension of
a police state. I hope that Congress can act to end this national shame.

Thank you for allowing me this time.

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